Rental demand highest in W Cape
Cape Town too expensive for buyers
RESIDENTIAL rental escalations in the Western Cape remained in double-digit territory at 12.53% year-on-year in the first quarter of this year, and the rental market was probably being boosted by deteriorating affordability among aspirant homeowners, according to TPN credit bureau.
By comparison, residential rentals grew 5.47% year-on-year in Gauteng in the first quarter and 2.1% in KwaZulu-Natal, while rental growth nationally averaged at 4.71%.
TPN said possible evidence of the affordability challenges in Cape Town, that may have boosted rental demand, came from FNB’s estate agent survey. This showed very low estimated first-time buyer levels in Cape Town in both the fourth quarter of last year and the first quarter of this year, with first-time buyers accounting for about 8% of total residential sales in Cape Town compared with the national average of 21%. First-time buyers accounted for about 27% of total buyers in Johannesburg, 21% in Tshwane and 14% in eThekwini.
TPN suspected the low estimate of firsttime buyers in Cape Town could reflect the significant deterioration in home-buying affordability as the already expensive Cape Town became significantly more expensive.
“Where would many of these aspirant young home buyers go? Probably in many cases into the rental market for the time being, saving up to be able to purchase a home at an older age,” it said.
TPN added that the Western Cape home-buying market had boomed in recent times, while the rest of the country was mired in mediocrity, because the province had marketed itself successfully as a lifestyle province and one that was well managed and run. This had resulted in a strong migration of middle- to higher-income households to the Western Cape, which had exerted upward pressure on house prices in recent years, TPN said.
It said FNB’s most recent annual repeat-buyer estimate revealed the Western Cape in 2015 experienced a net inflow of repeat home buyers of 12.2% compared to the net outflow of repeat home buyers of –3.2% in Gauteng, while the other major provinces did not fare much better.
But TPN said the health of the residential market in Cape Town was also driven by “a superior Western Cape economy”.
The Western Cape once again “comes out tops against all nine provinces” when examining the percentage of tenants in good standing with their landlords.
TPN said 88% of rental tenants in the Western Cape were in good standing in the first quarter of this year, compared to 84.79% in the Eastern Cape, 82.77% nationally, 81.89% in Gauteng and 80.5% in KwaZulu-Natal. Tenants in good standing comprise tenants who paid on time, paid late and those who received a grace period in which to pay.
To date there had not been any noteworthy decline in the percentage of tenants in good standing in the Western Cape, while this percentage had slipped more noticeably in the other three major provinces, together with the national average.
“This suggests that strong rental escalations have yet to exert noticeable pressure on the tenant population due to possible deteriorating rental affordability.
“This, along with the province’s superior performance in the home-buying market seems to suggest that its economic and household disposable income growth performance is outstripping the other regions,” it said.